Tiffany & Co - Looks Very Enticing

Written by MrStockFox. Posted in Weekly Update

For the long term investor Tiffany is starting to look very enticing at these levels.  I tend to like to value a company based upon its EV/EBITDA ratio.  

Here is Wikipedia's definition of EV/EBITDA ratio:

Enterprise value/EBITDA (more commonly referred to by the acronym EV/EBITDA) is a popular valuation multiple used in the finance industry to measure the value of a company. It is the most widely used valuation multiple based on enterprise value and is often used in conjunction with, or as an alternative to, the P/E ratio (Price/Earnings ratio) to determine the fair market value of a company.

An advantage of this multiple is that it is capital structure-neutral, and, therefore, this multiple can be used to directly compare companies with different levels of debt.

Anything below 10 starts to look interesting and when a company with a world leading Moat falls over 30%, I get very interested.  On Thursday I added 49 shares of Tiffany to my longer term dividend portfolio and on Friday I learned that Tiffany raised its dividend 12.5%, ChaChing!  As you can see on the chart, Tiffany EV/EBITDA ratio and usually price have always bottomed around this area(excluding 2008).  Should TIF continue to fall into the 50's I will continue to buy.  Anything below 65 looks like a great entry for the longer term.

Here is an excellant article everyone should consider reading on the company: Tiffany & Co.’s Valuation A Five-Year Re-Examination of the Nation’s Premier Jewelry Store

Tiffany & Co

 

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